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A world of communities – Global summary of the research results

Not surprisingly, a dominant challenge facing new business founders around the world is a lack of funding. Entrepreneurs devote a large amount of their time in the pre-launch, start-up and scale-up phases to sourcing angel or seed investment or bank loans. But tight financing is far from their only hurdle. Large numbers in the survey complain of being unable to identify or tap government support, and of being burdened by red tape. Two other oft-cited challenges are more intangible—a fear of failure and a lack of entrepreneurial role models.

In such circumstances, the advice of peers and mentors is sorely needed. “If you don’t have an ecosystem of people you can tap into for support, to help out with, say, finding talent or just making contacts, it’s 20-30 times harder to get your business off the ground,” says Bryce Keane, co-founder of London-based 3beards, which facilitates entrepreneur networking events in the technology sector.

Finding good advice

Against this background it should not come as a surprise that informal communities have become important sources of support to entrepreneurs when starting their businesses. Globally, new business founders rely heavily on banks as well as industry associations for help during the start-up phase. But informal communities and activities are as, or more, important to our survey group than formal structures such as incubators and accelerators, and are nearly as important as associations. In Tel Aviv – where launching a start-up is comparatively difficult (see above)—meeting fellow entrepreneurs in informal settings is the single most important source of support. The same is true in New York and London.

For Sharon Klapka, chairwoman of New York Hearts Tech, a community set up to support online businesses in the fashion, beauty and lifestyle industries, this finding is self-evident. Formal structures such as incubators and accelerators are useful, but to a limited number of entrepreneurs and in a limited fashion, she believes. Participating in community networking activities, says Ms Klapka, “can expose people to a larger universe of peers in informal, comfortable settings, where they can get advice on any number of issues.”

78% agree: “The informal environment will be important or very important to their business over the next three years”

Entrepreneur communities are rich sources of business model advice for new business founders. “Are we targeting the right market segment with our product? Are there potential partners out there who could help us reach that segment faster? Could our model be undermined by lower cost or bigger rivals?” Mentors organised through incubator or accelerator programmes help answer such questions. But similar questions are posed to peers in informal settings, such as those organised in London by 3beards, where founders demo their products and get group feedback in monthly gatherings.

Communities are also useful forums for getting practical advice from peers. This might take the form, as highlighted by the survey respondents, of referrals to potential customers or suggestions of how to resolve particular technology issues (naturally a frequent topic of discussion given that technology underpins most start-up business models today). In Singapore, according to Ted Chen, a co-founder of Evercomm, an energy start-up, informal communities also point new business founders to the various sources of government support that exist there for new businesses.

“Especially for first time entrepreneurs, informal networking is needed just to gain an understanding of the local ecosystem.”

– Ted Chen, co-founder, Evercomm (Singapore)

Networking comes naturally

Entrepreneurs are avid networkers. Over half of the survey group (58%) are hooked into entrepreneur-oriented social networking groups on global platforms such as LinkedIn, Facebook or WhatsApp. Over one-third (36%) also connect with entrepreneurs in locally oriented social networks or “meetup” groups. And they are tapped into not one but several such networks: half of the survey respondents are involved in six or more global networks (28% in more than 10), and 44% participate in six or more local online groups.

“Online groups are really powerful [for entrepreneurs] in Singapore. The best are mobile-based chat groups. They’re great for throwing an idea out there and seeing what everyone else thinks, as a bit of a feedback loop.”

– Rob Findlay, founder, NextBank (Singapore)

When it comes to global networks, entrepreneurs in Ho Chi Minh City emerge as the most “polygamous”: 39% of respondents there are involved in more than 10 groups. Singapore and San Francisco entrepreneurs are only slightly less active, with 34% and 32% of respondents respectively, taking part in more than 10 networks.

Participation in physical networking activities is less frequent than the online variety – which is logical given that the former requires a larger time investment. One exception to this is Shanghai, where the various forms of online and physical networking are similarly high; the other is Seoul, where networking activity in general is considerably lower than elsewhere. Online and physical networking activities do appear to be complementary, rather than mutually exclusive. Nearly three in 10 (29%) in the global sample attend physical networking events organised by business associations in their city, and nearly the same number visit co-working spaces or innovation hubs or some sort. Just over one quarter (26%) attend networking events organised by supra-national groups such as international alumni associations, and 23% attend these events when organised by locally-oriented groups, such as high schools or community organisations.

Active networking appears to have a positive impact on the performance of entrepreneurs’ businesses. Among the global sample, the greater the number of networking activities entrepreneurs engage in – whether they are in social media groups, in physical events, in visits to incubators or co-working spaces, or taking other forms – the more likely it is that they will deem themselves stronger than their competitors in terms of profitability, revenue growth, innovation, capitalisation and talent.3

Knowing where to look

Founders of all new businesses are chronically strapped for time. Setting aside some to identify and learn about the communities that can help them is a challenge, and particularly so for first time entrepreneurs just learning the ropes. The good news in this context is that the overwhelming majority (87%) of survey respondents say that their knowledge of the entrepreneurial communities in their city has improved in the past three years.

Less positive is the result that 55% of them find it difficult to access informal communities because their ad hoc nature makes them hard to find. Hong Kong and Seoul respondents find this a particular challenge. But neither is it straightforward, apparently, in Western cities such as London. Mr Keane of 3beard finds this surprising, suggesting that browsing the web should quickly yield the identity of a number of relevant communities. He and other community facilitators acknowledge, however, that many, if not most, of their participants come to them through word-of-mouth referrals. The larger communities likely to have prominence on the web are also a relatively recent phenomenon, emerging in the past 5-6 years.

Can (and should) governments help?

In many cities, governments are active supporters of formal support structures such as technology parks and incubators. National or local government departments may be financial sponsors of some organisations, or provide other forms of financial support. It is generally not the case when it comes to entrepreneur communities, especially the informal kind.

The majority of survey respondents (55%) gave positive marks to their governments for broad support to entrepreneurship in their cities. This does not extend to communities: seven out of 10 believe official support for entrepreneur communities is insufficient (a notable exception is Shanghai, where this is the view of only 43% of respondents); nearly nine in 10 say government should do a better job of supporting them. (On this latter point, Shanghai entrepreneurs wholeheartedly agree.)

This is not, however, a universally held view among community facilitators. Some doubt the value of government support for what is by nature grass-roots networking. For others, government support comes with uncomfortable strings attached. “We value our independence,” says Mr Keane.

3. Caveat: Respondents were asked to assess their firms’ performance vis-à-vis their industry peers, so some personal bias may colour their responses.